NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns the following ratings to the New York City
Municipal Water Finance Authority's $400 million Water and Sewer System
Second General Resolution (SGR) Revenue Bonds Adjustable Rate Fiscal
2015 Series BB:

--$100,000,000 Fiscal 2015 subseries BB-1 'AA+/F1';

--$100,000,000 Fiscal 2015 subseries BB-2 'AA+/F1';

--$100,000,000 Fiscal 2015 subseries BB-3 'AA+/F1';

--$100,000,000 Fiscal 2015 subseries BB-4 'AA+/F1+'.

The Rating Outlook is Stable for the long-term ratings.

SECURITY

The SGR bonds are special obligations of the New York City Municipal
Water Finance Authority (NYW), payable solely from and secured by a
subordinate lien on gross revenues of NYW's combined system.

KEY LONG-TERM RATING DRIVERS

SOUND LEGAL PROTECTIONS: NYW's primary credit strength is its legal
structure, including its status as a bankruptcy-remote issuer, providing
substantial protection to bondholders from potential operating risks
associated with the combined utility system (the system) and New York
City (the city).

REGIONAL PROVIDER OF AN ESSENTIAL SERVICE: The system provides an
essential service to an exceptionally large, diverse and economically
important service area. The system benefits from an abundant,
high-quality water supply exempt from expensive filtration requirements
and transmission costs.

INDEPENDENT RATE-SETTING AUTHORITY: Strong financial management and a
proven ability and willingness to independently raise rates are
reflected in consistently solid financial results, despite the continued
volatility in consumption.

HIGHLY LEVERAGED SYSTEM: Debt levels are high as a result of having to
comply historically with environmental mandates and maintain a large
urban system and its aging assets. Declining but still sizeable debt
issuances programmed into the current capital plan will keep debt levels
elevated for the long term.

The short-term ratings are based on the liquidity support in the form of
Standby Bond Purchase Agreements (SBPAs) provided by Bank of America,
National Association ('A/F1', Stable Outlook) for subseries BB-1, Mizuho
Bank Ltd. ('A-/F1', Stable Outlook) for subseries BB-2, Wells Fargo
Bank, National Association ('AA-/F1+', Stable Outlook) for subseries
BB-4, and on the liquidity support in the form of a standby letter of
credit (LOC) provided by Sumitomo Mitsui Banking Corporation ('A-/F1',
Stable Outlook) for subseries BB-3.

The SBPAs provide for the payment of the principal component of purchase
price plus an amount equal to 35 days of interest calculated at a
maximum rate of 9%, based on a year of 365 days for tendered bonds
during the daily, weekly, and two-day rate modes in the event that the
proceeds of a remarketing of the bonds are insufficient to pay the
purchase price following an optional or mandatory tender. The LOC for
subseries BB-3 provides for the payment of the principal component of
purchase price plus an amount equal to 35 days of interest calculated at
a maximum rate of 9%, based on a year of 365 days for tendered bonds
during the weekly rate mode only. The SBPAs will expire on July 10, 2017
(BB-1), July 8, 2016 (BB-2), July 10, 2018 (BB-4), the stated expiration
dates, unless such dates are extended, conversion to a rate mode other
than daily, weekly, or two-day rate; or upon the occurrence of certain
other events of default which result in a mandatory tender or other
termination events related to the credit of the bonds which result in an
automatic and immediate termination. The LOC will expire on July 10,
2018, the stated expiration date, unless such date is extended,
conversion to a rate mode other than weekly rate; or upon the occurrence
of certain other events of default which result in a mandatory tender or
other termination events related to the credit of the bonds which result
in an automatic and immediate termination. The remarketing agents for
the bonds are Merrill Lynch, Pierce, Fenner and Smith Incorporated
(subseries BB-1), RBC Capital Markets LLC (subseries BB-2), Citigroup
Global Markets Inc. (subseries BB-3) and Wells Fargo Bank, National
Association (subseries BB-4). The bonds are expected to be delivered on
or about July 10, 2014.

The subseries BB-1, BB-2, and BB-4 bonds will be issued in the daily
rate mode, but may be converted to a weekly, two-day, commercial paper,
flexible or fixed rate. The subseries BB-3 bonds will be issued in the
weekly rate mode, but may be converted to a daily, two-day, commercial
paper, flexible or fixed rate. While bonds bear interest in the daily,
weekly, or two-day rate mode, interest is paid on the 15th calendar day
of each month, commencing Aug.15. 2014. Holders of bonds bearing
interest in the daily, weekly, or two-day rate modes may tender their
bonds for purchase with the requisite prior notice. The trustee/tender
agent is obligated to make timely draws on the SBPAs and LOC to pay
purchase price in the event of insufficient remarketing proceeds, and in
connection with the expiration or termination of the SBPAs and LOC,
except in the case of the credit-related events permitting immediate
termination or suspension of the SBPAs and LOC.

Funds drawn under the SBPAs and LOC are held uninvested, and are free
from any lien prior to that of the bondholders. Bonds are subject to a
mandatory tender: (1) on each interest rate mode conversion date, except
between daily, weekly, and two-day rate modes; (2) on each interest
reset date for bonds in the commercial paper and flexible rate modes;
(3) upon the expiration or earlier termination of the SBPAs or LOC, and
(4) on any substitution of the SBPAs or LOC which results in a reduction
or withdrawal of the ratings assigned to the bonds. Optional and
mandatory redemption provisions also apply to the bonds pursuant to the
terms of the documents.

Bond proceeds will be used by the Authority to pay: (i) principal on a
portion of the Authority's outstanding commercial paper notes, (ii)
costs of improvements to the water and sewer systems, and (iii) certain
costs of issuance.

RATING SENSITIVITIES:

LONG-TERM RATING SENSITIVITIES

MAINTENANCE OF SUFFICIENT RATES: Failure to achieve rate hikes
sufficient to ensure comparable financial margins and maintain current
debt service coverage (DSC) levels on senior and subordinate lien
obligations would be viewed negatively.

RISING DEBT LEVELS: The continued escalation in the system's debt levels
remains an increasing concern that could ultimately pressure the rating.
Increases in leverage beyond what is currently forecast would likely
place added pressure on the authority's current rating.

SHORT TERM RATING SENSITIVITIES

The short-term ratings reflect the short-term ratings that Fitch
maintains on the banks providing liquidity support and will be adjusted
upward or downward in conjunction with the short-term rating of the
respective bank and, in some cases, the long-term rating of the bonds.
The long-term rating is exclusively tied to the creditworthiness of the
bond obligor and will reflect all changes to that rating.

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